Social protection spending doubles at home, but donor support remains limited

Social protection can play a significant role in helping Pacific countries and households weather the economic impacts of shocks such as the Iran war.^* Social protection comprises cash transfers, old age pensions, disability benefits, child and family allowances, unemployment support, and social insurance schemes. In normal times, these programs help lift people out of poverty, enable households to invest in health and education, and protect individuals from shocks such as unemployment or illness that could otherwise cause lasting harm.

During economic shocks at the national level, social protection helps target support to vulnerable individuals, maintain household investments in health and education, provide countercyclical stimulus, and limit long-term economic scarring. Strong existing systems can also be scaled up quickly during a crisis. Concerns that such programs disincentivise work in developing countries are not borne out by the evidence.^*

Social protection is especially relevant to Pacific countries given their exposure to external economic shocks (including climate impacts), limited domestic economic opportunities, large aid inflows, and heavy reliance on non-tax revenues (e.g. fishing licence fees, commodity royalties, and trust fund income).

Pacific governments have been spending more on social protection programs in recent years, especially during the Covid pandemic, reflecting growing recognition of their value in shielding households from major economic shocks and supporting resilient and inclusive development. Over the past decade, this spending has risen from 0.9% to 2.3% of gross national income.^* This, however, remains lower than in other middle-income countries (2.5–8%) and far lower than in high-income countries (16%).^* Coverage is often narrowly focused on old age and disability programs, limiting governments’ ability to use existing systems to respond rapidly and effectively with targeted support during crises.

While Pacific governments have substantially increased their spending in this sector, the response from development partners has been more limited. ODF for social protection falls into two types: 1) projects directly supporting these programs; and 2) budget support linked to social protection policy actions by recipient governments. Funds for the latter may or may not be used directly for these programs. Nonetheless, where budget support is a substantial source of government revenue, these funds are likely to at least partially support social protection transfers while also incentivising supportive policy actions.

Since 2008, ODF for social protection in the Pacific has totalled $926 million, equivalent to less than 1% of total ODF to the region, and is highly concentrated. Six donors account for more than 90% of flows, led by Australia ($306 million), the World Bank ($224 million), and the ADB ($211 million), with New Zealand, the UN system, and Japan providing smaller shares.^* Fiji and PNG together have received around half of all disbursements.

Financing is episodic and closely correlated with crisis periods. Recorded spending rose during the pandemic to an annual average of around $100 million between 2020 and 2022, drawing on both budget support and dedicated projects, but at that peak it still represented only around 2% of total regional ODF. It has since dropped to $33.4 million in 2024, or 0.8% (Figure 18).

The makeup of these initiatives varies widely. The World Bank delivers through a small number of large projects concentrated in Fiji and PNG, including its $85 million PNG Child Nutrition and Social Protection Project, the single largest commitment in the sector. ADB spending on social protection has been dominated by crisis-response operations mobilised after Cyclone Winston and the Covid pandemic, and successive disaster recovery operations. Australia’s footprint is by far the most diversified, with a number of distinct projects spanning labour mobility, gender equity, disability inclusion, and disaster recovery. New Zealand’s portfolio mirrors Australia’s at roughly a quarter of the scale.

Data from the Organisation for Economic Co-operation and Development (OECD) shows that social protection accounted for about 0.8% of ODA globally in 2024. In the Pacific, the share is marginally higher at 0.9%. This sits at odds with the relevance of social protection to the region’s structural characteristics, especially its high vulnerability to external economic shocks.